EU leaders debated new proposals for a huge post-coronavirus economic recovery fund on Saturday, seeking to overcome resistance from the Netherlands and Austria on the second day of an extraordinary summit.
European Council president and summit host Charles Michel proposed a fresh plan after his initial blueprint for a 750-billion-euro ($850 billion) recovery package ran into stiff resistance from the member states known in Brussels as the “Frugals”.
Dutch opposition and the ‘frugals’
Dutch Prime Minister Mark Rutte has insisted that member states retain the final say over approval of any EU funding for national recovery plans for partners like Spain and Italy, whose economies were ravaged by the virus and its attendant lockdowns.
In a concession to Rutte’s demands, Michel’s new plan includes a “super emergency brake” that gives any country a three-day window to trigger a review by all member states of another’s spending plans.
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But analysts warned that it amounted to a right of veto and it remains to be seen whether countries such as Spain and Italy will accept it, a European source saying the frugal countries were still not happy with the broader package and were seeking more cuts.
“In the end this is a package and there are many more issues to solve, but the proposal on governance as put forward by Michel is a serious step in the right direction. Many issues remain and whether we get there will depend on the next 24 hours,” a Dutch diplomat said.
Opposition from the 'frugal four' and the allocation of funds call into question whether this can truly be Europe’s moment. https://t.co/Hp7XshshDY
— International Politics & Society (@ips_journal) July 15, 2020
Rutte says EU oversight is necessary to oblige countries to reform their labour markets, and said the atmosphere at Friday night’s dinner had turned “grumpy“.
Talking to reporters late on Friday, he urged southern partners not to drag their feet on reform “to make sure that next time, when for whatever reason there is a crisis again, economic or otherwise, countries are better able to take care of themselves”.
Right of veto
Before talks with all 27 leaders restarted, Michel held a roundtable with Rutte, German Chancellor Angela Merkel, French President Emmanuel Macron and the Italian and Spanish PMs to test out his new proposal.
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It would keep the total recovery budget at 750 million euros, but shift the balance slightly from grants — down from 500 million to 450 million — to loans, which rise from 250 million to 300 million, according to a document.
A diplomat from a non-frugal state has warned: “What the Netherlands wants is legally impossible and politically difficult to swallow.”
While Rutte acknowledged he was alone in his hard line on the need for unanimous approval of grants, Austria also raised objections.
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Chancellor Sebastian Kurz wants the recovery fund to be smaller, tweeting late on Friday to reject the initial plan for 500 billion euros in grants and subsidies.
“If the money is not used to invest in the future, if it does not go hand in hand with necessary reforms in states that are simply broken in their systems… then all this will fizzle out,” he warned.
As a further sweetener for Austria, the Netherlands and the other “frugals” — Sweden and Denmark — Michel’s new plan sees a hike in the rebates they get on their EU contributions.
The ‘misers’ not ‘frugals’
Polish Prime Minister Mateusz Morawiecki, who like several other Eastern European leaders is resisting plans to link funds to green policies and rule of law commitments, branded Rutte and his allies as “misers”.
Morawiecki warned there was a “high degree of probability” that a final deal would not be reached even by Sunday.
Dutch prime minister Mark Rutte said: "This is going to take a while". https://t.co/QRFMCaIENB
— Evening Standard (@standardnews) July 18, 2020
“We’re saying that we may meet again in July — we’re ready for the next round of talks,” he told Polish media.
He also admitted there was a possibility that “the negotiations will continue for many months”.
But there was support for the Frugals from Bulgarian Prime Minister Boyko Borisov, who said it was “very natural” that countries making big contributions should want the money to be spent effectively.
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Before the talks Rutte insisted he wanted to show solidarity with countries that don’t have the budget to stoke a meaningful recovery.
“But at the same time, you can also ask those countries to do everything possible to solve this yourselves the next time. And you do this through reforms, in the labour market, in pensions etc,” he added.
The recovery fund is in addition to the planned seven-year EU budget — worth more than one trillion euros — that the leaders must also agree in the coming weeks or months.
AFP with additional input by GVS News Desk